Troubled mortgage backers Freddie Mac and Fannie Mae are limping their way back towards being solvent. Both troubled home loan backing houses were placed under government conservatorship in 2008. Since then, the 2 firms have been injected with more than $130 billion in loans to keep them afloat. However, a brand new round of foreclosures is on the horizon, and that may undo any progress that has been made.
Staying in business is the goal of Fannie and Freddie
During the federal bailouts that have been occurring, Freddie Mac and Fannie Mae have gotten a lot of the money. Both mortgage houses received a combined sum of more than $130 billion to keep the real estate sector afloat. ABC reports the businesses are starting to lose less money currently. During the last quarter of 2010, the period from Oct to December, Fannie Mae posted a loss of only $2.1 billion and Freddie Mac posted a loss of only $1.7 billion. A $16.3 billion loss from Fannie and $7.8 billion loss from Freddie was reported in this very same time of 2009. The decreased losses haven’t stopped the two corporations from asking for more loans though. In fact, $500 million from Freddie and $2.6 billion from Fannie have been requested in loans.
Using less of the home loan titans
For decades, Freddie Mac and Fannie Mae have played a crucial role in the real estate industry. The two companies purchase home loans and resell them as investments in order to free up capital for lenders to lend more mortgages. The government is intending to find ways to get Fannie and Freddie out of the mortgage market. Just reducing involvement might help a lot. USA Today reports that Congress is being told to get a plan together before voting by Treasury Secretary Timothy Geithner. The housing finance industry might get destabilized while the real estate market might have other problems from these programs getting cut, Geithner warned. Geithner has recommended a gradual program as the best course.
More issues for the companies
In the coming months, more damage is anticipated to be hitting Fannie and Freddie. Until "robo-signing" cases are solved, many foreclosures cannot be completed while about 50 percent of home loans in the United States are owned by Fannie and Freddie while 90 percent were created in the last few years. Whatever reforms take place concerning Fannie and Freddie, Treasury Secretary Geithner expects housing prices to rise just a little bit over the next few years, according to Reuters. He also recommended that given housing conditions over the past few years, home buyers put larger amounts of cash down to ensure greater stability.
Information from
ABC News
abcnews.go.com/Business/wireStory?id=12995329&page=1
USA Today
usatoday.com/money/economy/housing/2011-03-01-fannie-freddie-geithner_N.htm
Reuters
reuters.com/article/2011/03/01/us-usa-housing-geithner-idUSTRE72000P20110301?pageNumber=1
No comments:
Post a Comment